Catweasel not sorcerer or magician. Cannot make or see next crisis. Only liar say when next crisis happen. Mice and sheep not read enough to understand. Have to rely on newspaper and real estate agent to make decision for them. Very bad situation when not thinking. Strindberg asking when?? question because not thinking or thinking like mouse or sheep. But Catweasel know that AUD fall in next crisis because Catweasel study global capital flows. Most important thing to know, but mice still not understand reason why.
Australia's Dollar Heads for First Drop in Eight Days Amid Europe Concerns
By Monami Yui and Garfield Reynolds - Nov 8, 2010 2:45 PM ET
The Australian dollar fell against the greenback, heading for its first drop in eight days, amid concern that European nations’ efforts to cut spending will crimp economic growth, sapping demand for higher-yield assets.
The so-called Aussie weakened against 13 of its 16 most- active counterparts before a European Union official visits Dublin to review Ireland’s plans to trim its budget deficit. New Zealand’s dollar dropped from near the strongest since April 2008 after a vine infection was discovered at a kiwifruit orchard and data showed the nation’s cash deficit was wider than an earlier estimate.
“People are a little bit worried about sovereign debt in Greece, Ireland and Portugal,” said Derek Mumford, a Sydney- based director at Rochford Capital, a currency and rates risk management firm. “Certainly there has been some selling-off of the euro and buying of the U.S. dollar” and that is pulling the Australian dollar lower.
Australia’s dollar fell 0.4 percent to $1.0123 at 2:20 p.m. in Sydney from $1.0159 in New York on Nov. 5, when it climbed to $1.0183, the strongest since exchange controls were scrapped in 1983. The currency slid to 82.16 yen from 82.54 yen.
New Zealand’s dollar dropped 0.8 percent to 78.88 U.S. cents after rising to 79.76 cents on Nov. 4, the strongest since April 2008. The so-called kiwi slipped 0.9 percent to 64.04 yen.
EU Economic and Monetary Affairs Commissioner Olli Rehn arrives in Dublin today for a two-day visit after the Irish government laid out a plan last week to cut spending and raise taxes by as much as 6 billion euros ($8.4 billion) in 2011. Rehn is due to hold a press conference with Lenihan today.
Vine Disease
Benchmark interest rates are 4.75 percent in Australia and 3 percent in New Zealand. U.S. policy makers kept their rate at zero to 0.25 percent last week, and the Bank of Japan held its benchmark at zero to 0.1 percent.
The extra yield investors get by investing in two-year Australian government debt compared with similar-maturity U.S. Treasuries stood at 4.65 percentage points, compared with this year’s low of 3.19 percentage points on Feb. 2.
New Zealand said it is trying to prevent the spread of a newly discovered vine infection from a North Island kiwifruit orchard. Testing is under way to determine whether the infection is a bacterial kiwifruit vine disease, Biosecurity Minister David Carter said in an e-mailed statement.
“The headline about kiwifruit disease may have caused some selling on concerns about the export impact,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “Still, the fruit only accounts for about 2.5 percent of merchandise, so the long-term implications are small.”
Cash Deficit
New Zealand’s dollar may fall as low as 77.50 cents after the kiwifruit disease report, though it is likely to rebound on the improving economic outlook if risk appetite remains strong, Speizer said.
The kiwi dollar also fell as data showed the nation’s budget cash deficit was wider than the government forecast last quarter. The deficit totaled NZ$6.45 billion ($5.1 billion) in the three months ended Sept. 30, or NZ$885 million more than forecast in May’s budget, the Treasury Department said in a statement released in Wellington today.
The kiwi is likely to rise above 80 U.S. cents and cause further problems for the nation’s exporters, Prime Minister John Key said today. The government was not planning to intervene as it was a “very expensive” course of action and there was little evidence it had worked in the past, said Key.
Weakening Greenback
Demand for both South Pacific nations’ currencies also weakened on speculation their recent advance has been too rapid.
“The weakening trend of the U.S. dollar has contributed the most to the gains in the Aussie and kiwi,” said Yuki Sakasai, a currency strategist at Barclays Bank Plc. The fair value for the Australian dollar is about 17 percent lower than the current level, according to Sakasai.
Australia’s dollar, this quarter’s best-performing major currency, is the most overvalued according to data compiled by Bloomberg. Purchasing power parity, a measure of the cost of goods relative to other countries, shows the so-called Aussie is 32 percent too expensive. New Zealand’s dollar is the second- most overvalued currency.
Australian bond futures were little changed, with the 10- year contract for December delivery at 94.705 on the Sydney Futures Exchange from 94.730 yesterday. The implied yield on the futures stood at 5.30 percent from 5.27 percent.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.035. It climbed to 4.11 on Nov. 5, the highest level since July 29.
The Australian dollar has opened lower, sinking below parity for the second time in a week.
In early local trade, the Australian dollar was trading at 99.75 US cents, down from 100.44 US cents at the local close on Thursday.
During the offshore session the unit traded between 100.91 US cents and 99.57 cents. Advertisement: Story continues below
During Wednesday’s offshore session, the unit hit a low of 99.97 US cents. Before that, it hadn’t been below parity since November 3, when it hit a low of 99.07 US cents.
HiFX trading director Mike Hollows said the Aussie had been under sustained pressure as investors continued to fret about Europe’s sovereign debt crisis.
‘‘It’s all about euro-zone sovereign risk and the possibility of default in Ireland,’’ he said. ‘‘The euro is sharply lower and that’s helped drag the Aussie lower.’’
Ireland’s cost of borrowing hit record highs on Thursday, fuelling fears that the eurozone debt and deficit crisis could be entering a dangerous second phase just six months after a bailout of Greece.
Irish 10-year government bond yields jumped to 8.929 per cent, the highest level since the euro was created in 1999, placing Europe’s bond markets under serious strain.
Portuguese bond yields also hit historic peaks on Thursday.
Amid mounting concerns over Ireland, European Commission president Jose Manuel Barroso insisted the European Union was prepared to stand by the struggling eurozone nation.
‘‘What is important to know is that we have all the necessary instruments in place now to support Ireland if necessary,’’ said Mr Barroso, speaking in Seoul where a G20 summit of world leaders began on Thursday.
Irish bond yields - the rate of return paid to investors holding the government debt instruments - have soared in the face of mounting investor unease at the country’s stretched public finances.
Mr Hollow’s said investors were already tetchy before the news about Ireland due to the ‘‘spectre’’ of the G20 meeting.
He said some would be concerned about the possibility of new, more restrictive global financial rules coming out of the meeting.‘‘So all and all, the Aussie is off the boil for the minute,’’ he said.
The Australian dollar opened half a US cent lower as traders move away from high-risk, high-yield assets amid fears of slowing Chinese growth and European sovereign debt problems.
At 7am eastern daylight time, the Australian dollar was trading at 98.55 US cents, down from Friday's close of 99.11 US cents. It was also buying 81.22 yen, 71.94 euro cents and 61.06 pence.
Since 5pm Friday, the local unit traded between 98.25 US cents and 99.45 US cents. Advertisement: Story continues below
Bank of New Zealand currency strategist Mike Jones said the Australian dollar's fall was due to a combination of factors.
"We saw on Friday night the Aussie crash back below 99 US cents as rising risk aversion took a clear toll on growth sensitive assets like the Aussie dollar," he said.
"Firstly, there were concerns about Ireland and whether they'll need a bailout from the EU.
"In addition, there are rumours circulating about a possible further Chinese monetary policy tightening that tended to dampen global growth sentiment.
"Equity markets are off between one and five per cent, commodity prices tumbled and against that backdrop it was no surprise to see the Aussie dollar lose some of its lustre."
Ireland's cost of borrowing hit record highs last week, fuelling fears that the eurozone debt and deficit crisis could be entering a dangerous second phase just six months after a bailout of Greece.
There is speculation that China might put the brakes on its surging economy after its inflation rose to a two-year high of 4.4 per cent.
Any slowdown in the Chinese economy will likely reduce global demand for oil, metals and grains, which sent prices of those commodities lower.
Mr Jones said the problems over sovereign debt in Europe and, in particular Ireland, would be the main influence on Australian dollar this week.
"If Irish officials can delay fears over a sovereign default we might see risk appetite recover and the Aussie dollar get above parity but that's a big if," he said.
"All eyes are on Ireland and whether this crisis spreads to Spain and Portugal, and to other vunerable states."
Mr Jones expects the Australian dollar to trade between 98.1 and 99.4 US cents on today.
The Australian dollar has fallen sharply and local stocks are set to sink as worries rise over tensions in the Korean Peninsula.
The Australian dollar slumped in foreign trade overnight, reaching a low of 97.08 US cents early this morning - a far cry from the parity-plus levels of just a fortnight ago, when it was approaching 102 US cents.
This morning, it was almost 2 US cents lower than the 98.95-US-cent level of 24 hours earlier. The currency fell sharply late yesterday when news of the Korean trouble filtered through to the rest of the world; its value was depleted further in the hours that followed. Advertisement: Story continues below
The Australian dollar is considered a risky asset and investors shy away from it when there are signs global economic growth could be affected.
And the local futures market - the best indicator of the performance of Australian shares - has also taken a beating after US stocks tumbled on a combination of concerns about European debt woes and the Korean situation.
In late afternoon trade in New York, the major US indices were down between 1.3 and 1.5 per cent. The local futures index was 1.3 per cent lower this morning.
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